The state of British boatbuilding

A glamorous
lady wearing a ‘Sunseeker’ badge smiled devastatingly in my direction as I
strolled past the dazzling motor yacht upon which she stood. Instinctively, I
glanced over my shoulder to see who had gained her attention. There was no one
there. Then it dawned – was there a glimmer of the punter about me perhaps?
Looking at my drab jacket and corduroy trousers, I somehow doubted that. But in
this economic climate, who could blame a company’s employee for latching onto
any possible new customer?

The autumn
morning was dry and bright as I walked among the luxury motor yachts towering
above me, a stone’s throw from the small boats, chandlery stalls and general
boating paraphernalia to be found at the Southampton Boat Show.

What better
place to research the state of the British marine industry, which currently
contributes around £1bn to the UK economy while providing 12,500 jobs.

There used
to be small boat builders in every port in Britain. True artisans of the noble
craft, using traditional building methods and tools, many unchanged for
centuries. When the wonder material of GRP hit the mainstream in the 1960’s, it
opened the door to ‘series production’. Building time and therefore costs were
reduced. The door to a new market opened wide and a slew of high tech companies
joined the traditional builders keen to embrace this new ‘wonder’ material. It
all looked rosy for a while. Anyone who can remember the Earls Court Boat Shows
in the 60’s and 70’s will recall the mass of builders with wide ranges of
yachts and power boats. It could be argued that this was the golden age of
British leisure boat building. Then it all changed….

An amalgam
of economic downturn, soaring oil prices, inflation, the introduction of VAT
and lack of buyer confidence meant order books thinned and many builders went
under in the 1970’s and 1980’s. If it all sounds depressingly familiar, that’s
because it is. Familiar but happily, not quite the same. Then, big builders
meant big overheads. Many had expensive premises, high operating costs and a
large staff. In business, growth needs increased revenue. In boatbuilding, this
often leads to larger factories to meet demand. A hiccup in the economy is all too likely to quickly hit the
leisure sector, of course. This was exactly the story in the 1970’s. Orders
decreased and then, with the undercapitalized builders having further funding
cut off by the banks, the result was disaster. The good news today is that we
have retained many smaller builders, theoretically meaning more control in
troubled times and less call on cash volumes.

Market
atmosphere
As I walk
among the stands, I am struck by the number of lovely little British made
yachts and dinghies. I can see evidence of traditional skills here, and stooge
around picking up on the market atmosphere. I tune into a few conversations and
tap into the general vibe. Carefully examining a lovely little trailer sailer
in the classic style, I earwig a conversation between someone I take as the
builder and a staff member. They are complaining about cost of materials and
the expense of attending a boat show. I pick up a brochure, smile approvingly
at the boat and nod to them. I get a half glance in return. The pair looks
deflated so I move onto another stand.

This one
has some classic wooden dinghies and day sailers. A man on the stand watches me
as I run my fingers over the gunwale of a little beauty. I take a step back to
admire her. Will he come over to chat I wonder? I hope so but he turns away. No
enthusiasm it seems. It’s a similar story on a couple of other stands and so I
head off to the marina. Perhaps I will get a sense of positivity down there.

Here as
expected, I find the majority of berths occupied by French and German big
‘white yachts’ and powerboats. As I dawdle along the pontoons, I can’t help but
notice that their sales staff look pretty miserable too. There is a definite
lack of that smiling bravado one was so used to at boat shows of old. Is it me
though? I am just looking through my backward facing rose tinted goggles? I
quickly become objective and decide that is not the case. No, they are
miserable. Still, my mission is to report on what’s happening with the small
Brit’ builders so I make my way around in search of them.

I come
across a few good looking yachts from established south coast yards. Some
visitors are stopping to look at them and I overhear their approving comments -
mainly about not being just the standard mass produced items. I know what they
mean. A tick in the box then. But these people looked old. As I make my way
down the pontoon again, my thoughts turn to the future. How could the industry
gain interest from younger buyers? Was it possible to create desire within the
next generation of future boat owners in these recessionary times to provide
orders when the economy improved?

Financing
of stock
I spied a jaunty and good looking small
power boat from a yard based in the landlocked midlands. I am invited aboard
and leap into the cockpit, immediately struck by the finish and the quality of
the fit-out.

In the
light and airy wheelhouse, I fall into a dialogue with a gent who turns out to
be the yard owner and his East Coast agent. We talk about the boat, her target
market, the economy and most interestingly (for me anyway), the financial
challenges faced by a small boatbuilder in Britain today. The conversation
turns to the nemesis of the small company – cash flow. Not for the first time
today, I find myself asking about stock financing. When you are building a boat
for a customer, it is the norm to take money in stage payments. That way the
cost of the build is covered – in stages. But new build lead times can be long
in a small yard and a customer who wants a boat ready for the start of the new
season might be disappointed. That customer may well go elsewhere.

The answer
is to build for stock. A few hulls built and ready for final detail fit out can
work wonders for the business. It also means that any agents in the UK or
overseas can take a new boat into stock for local customers to view, which is
infinitely preferable to looking at a brochure or a website. I chat about the
benefits of stocking with the agent and he tells me that this would mean
another three sales next year totalling £450,000.

If lack of
cash flow prevents building for stock, the solution is finance provided by a
bank or lender. Predictably, this is not as easy as it sounds. All the builders
I spoke to who had approached their bank for stock financing were either turned
down or offered so many hoops to jump through that it just wasn’t viable.

I recalled
my work at a bank in America. We welcomed stock financing (we called it ‘floor
plan’) because we secured our funding on the asset’s cost price. In the event
of the customer defaulting, we knew that we could recoup our investment. The
chaps agreed that it was a good idea; our British banks would need more
convincing though. I headed back to the park. It was time for an ice cream and
a think.

I ordered
my ‘99′ from a smart ice cream van. The vendor had been working at every
Southampton Boat Show since 1976. I reckoned he could give me as good an inside
track on the performance of this one as anybody. He was free with his candid
information, which I digested along with my cone. According to Mr Whippy Man,
this show was the least attended he could remember. He also revealed a house
hold name motor yacht builder took orders for £4m on Tuesday and the world’s largest sailing boat
producer would need to sell four 50 footers to cover the cost of renting the
space and building the stand. Phew! This was one ice cream man who knew more
about super yachts than his Lyons Maid tubs. When I asked him about our small
builders, he shook his head resignedly. He reckoned the majority had lost
heart.

I find a
spot to sit down and make a few notes.

Summary
Unless you
have been on another planet since 2008, it should come as no surprise that just
about every business in the UK is struggling not only to sell but to finance
for growth… The leisure industry is always hit hard by economic downturns but
this time, the recession is very deep and it’s global nature is especially
tough on exports. We are all familiar with news items on bank lending issues,
and despite government ‘initiatives’, our least favourite institutions continue
to make only minimal contributions to Britain’s industry that desperately needs
growth to move out of recession. It strikes me that our boat building sector is
exactly the type of industry that banks and government should be supporting. We
have wonderful skills and products that help generate jobs, local growth and
exports all wrapped up with a sense of national pride in our maritime nation.

If we are
not careful, our boat builders will lose heart and give up. In business,
sometimes one can only bash a head against a wall for so long….

I take a
look up from my notebook and see a small gaff rigged boat perched ready- to- go
on her trailer. Will she be sold I wonder, and to who? Maybe someone trading
down from a larger yacht or a dinghy sailor going on to a first cruiser
perhaps? My thoughts turn to our children’s generation; after all they are key
to the future of the leisure boatbuilding industry in this country. Have our
boat builders created the desire for them to aspire to lovely little craft such
as this or have the global yacht producers and other elements of the leisure
sector won their hearts and subsequently, their future disposable income?

I conclude
that the industry has not really considered this enough, despite determining
its future. It’s too busy trying to survive – living hand to mouth.

What can be
done then? Well I believe quite a lot. For a start, the industry needs to find
lending sources willing to provide stock financing and support to improve cash
flow, whilst securing strong order books. Builders need to think more
about smarter business management
opportunities.

These include; growing their brand
across global markets through social networking, PR, marketing, improving
websites, on line communication, adding value through branded brokerage and
accessories. Builders might also consider re-fits on boats that they have
previously built and if they don’t have the space at their own yard, maybe they
could outsource the work to a trusted partner. Perhaps take on a part-time
business manager or non-exec director to help with these activities and
facilitate additional financing. Such a role could be funded by paying a small
retainer or maybe on results equals reward basis.

Finally, my
experience at the show confirmed to me that many stand representatives seemed a
bit lethargic. I tried my best to look like a prospective customer but usually
just got a blank reaction. I realise that working at boat shows is hard but
surely not brightly engaging with interested parties is just a waste of the
cost and effort involved in paying for and setting up the stands. Times are
tough but surely we must all put on a positive face.

The industry
has suffered in the past and I got the feeling at Southampton that many are
resigned to a bleak outlook. We cannot change the macro-economy but we can
alter our course to give the best chance of a safe passage when the global wind
changes direction…
Russell
Stevens
September
2012